Inventory Gains Fail to Stave Off National Home Price Increases

Inventory Gains Fail to Stave Off National Home Price Increases

home price increases

In June, first-time buyers made up only 31 percent of the market, unchanged from May and down one percentage point from a year ago. According to the 2017 Profile of Home Buyers and Sellers by the National Association of Realtors, first-time buyers accounted for 34 percent of all transactions last year. Realtors are noticing a pent-up demand from first-time buyers—particularly among millennials. However, according to Lawrence Yun, chief economist for the National Association of Realtors, “They’re just not making meaningful ground, and continue to be held back by too few choices in their price range, and thereby missing out on homeownership and wealth gains.”

Increase in Supply
The housing market saw a bit of relief from the ongoing inventory shortage in June. There were 1.95 million existing homes available for sale, a welcome increase of 4.3 percent from a month earlier and 0.5 percent from a year earlier. This was the first year-over-year increase in inventory since June 2015. At the current sales pace, this level of inventory represented a 4.3-month supply, up from 4.2 months a year ago.

An Even Greater Increase in Demand
Yet despite the year-over-year rise in inventory, the housing supply is still not large enough to satisfy the current level of demand. In June, the average property remained on the market for 26 days; this was unchanged from the past three months, but it was shorter than June 2017’s sale time of 28 days. What’s more, 58 percent of all homes sold in June were under contract in less than a month. If the booming economy continues to lead to an increase in buyer demand and new home construction continues to fall behind, the housing supply woes could intensify in the coming months.

Prices Edge Up
Not only did existing-home sales fall month over month in June, sales were down year over year for the fourth straight month. The drop in the actual pace of home sales is out of step with the increase in home buyer demand in most areas of the country. According to Yun, the housing shortage is to blame. “What is for sale in most areas is going under contract very fast and, in many cases, has multiple offers. This dynamic is keeping home price growth elevated, pricing out would-be buyers, and ultimately slowing sales.” This dynamic pushed the median sales price to a new all-time high of $276,900, toppling May’s previous record. This was also 5.2 percent higher than June 2017’s median sales price of $263,300. What’s more, for the past 76 months, prices have climbed year over year.

Regional Home Sales

Northeast – Existing-home sales annual rate of 720,000; an impressive increase of 5.9 percent from May but a decrease of 4 percent from June 2017.

Midwest – Existing-home sales annual rate of 1.27 million; a slight increase of 0.8 percent from May but a decrease of 3.1 percent from June 2017.

South – Existing-home sales annual rate of 2.25 million; a decrease of 2.2 percent from May but an increase of 0.4 percent from June 2017.

West – Existing-home sales annual rate of 1.14 million; a decrease of 2.6 percent from May and 5 percent from June 2017.